Oakcross Vineyards, LTD., Dennis D. Groth, Tax Matters Partner - Page 29

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          interest at 10 percent on the unpaid balance of grape purchases             
          by Winery, no interest was accrued for 1987 by Winery with                  
          respect to the amounts due Vineyards.  Winery's rent payments to            
          Vineyards also ceased during 1986.  This was done at the instance           
          of Bank of America.  Once Winery obtained a line of credit from             
          Napa National Bank, however, interest and rent payments resumed.            
               The foregoing facts demonstrate that Vineyards and Winery              
          dealt with each other on terms that were significantly different            
          from those on which they dealt with unrelated parties.  Moreover,           
          the record indicates to us that the terms on which they dealt               
          were intended to benefit Winery and imposed burdens on Vineyards.           
          Vineyards executed agreements subordinating its claims against              
          Winery to those of Winery's lenders to induce those lenders to              
          grant credit to Winery.  The terms on which Winery purchased                
          grapes from Vineyards were also intended to favor Winery.  For              
          instance, in a November 24, 1986, letter to Bank of America, Mr.            
          Groth wrote that "Judy and I have provided generous delayed                 
          payment terms to the Winery that are still adequate."  Without              
          the generous payment terms granted by Vineyards, Winery could not           
          have purchased the grapes it required without the infusion of               
          additional capital.                                                         
               Winery did not make payments to Vineyards for grape                    
          purchases during 1982 and 1983 because funds were not available.            
          Winery began to pay Vineyards after Winery obtained a line of               
          credit during 1984, but payments were subject to the control of             




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